A person may decide to claim that they are proprietorship because they have discovered that they were not being taxed properly by their employer says Edmonton bookkeeping. This can help a person minimize the taxes that they have to end up paying on that untaxed income. Anyone who has earned any income that was not taxed can file taxes as a proprietor. This means everything from people who work from the home, like a music teacher, hairdresser, or massage therapist, and charges clients directly for their services, and earn money that is not taxed already, or and unincorporated contractor, or even people that earn occasional money doing odd jobs for friends and family such as housecleaning, driving people to the airport, shoveling there is no or mowing their lawn. There is no minimum threshold that anyone needs to get to in order to claim that they are proprietors, so even if a person earns twenty-five dollars one time, they can use the proprietorship on their tax return to minimize taxes that they pay.
Many people think that if they start claiming that they are a business to Canada revenue agency, there also going to need to start collecting and paying GST. However, this is not correct, Edmonton bookkeeping says that the only time that people have to start collecting and paying GST is when they start making thirty thousand dollars or more in their business. And if that is the case, rather than claim proprietorship, the recommendation would be for people to incorporate their business and minimize even more taxes with the lower tax rate.
Since a proprietorship shares the same tax obligations of the proprietor, that means that a person who is claiming taxes this way need to understand that Bill files their proprietorship taxes at the same time as their personal taxes. They have an additional form to fill out, called a T2125, and they will get an additional forty-five days granted by the Canada revenue agency in order to get their paperwork in order. Rather than the typical April 30 personal tax deadline, proprietors will have until June 15 the claim both of their taxes.
One benefit of being a proprietor is that if they have a spouse, their spouse will also be able to claim taxes as a proprietor. Why this is significant, is because it can allow a person to income split with their spouse to further minimize the amount of taxes they have to pay. For example, if their spouse earns significantly less money, they will be able to decide how much of that untaxed income each person is going to claim. This might mean a split between the two, or it might even mean one spouse takes the entire amount to claim this can help people strategize in order to minimize the amount of taxes that they have to end up paying at year-end says Edmonton bookkeeping.
Any income that is considered untaxed income, can help people claim that they are a proprietorship, which can start earning them benefits of claiming expenses on their taxes, and income splitting with their spouse.
Edmonton Bookkeeping | How To Claim Taxes For Proprietorships
The Fraser Institute says that the average Canadian is paying 43% of their total income in a variety of taxes, Edmonton bookkeeping says that this makes taxes the single highest expenses that Canadians will face. Therefore, if they have any untaxed income at the end of the year, they may want to strategize on how they are going to file their taxes to minimize the amount of taxes that they are going to have to end up paying on that amount. Whether it is a small amount like a couple of hundred dollars, or a much larger amount like ten thousand dollars, avoiding having to pay almost half of that to the government can significantly impact not only a person but their entire family.
Edmonton bookkeeping says that people who earn any amount of untaxed income can be considered a proprietor. Essentially what a proprietor is, is the business owner of an unincorporated business. These businesses are not separate entities, and they actually remain attached legally not only to the business owner but the business owners’ tax obligations as well. This means that in order to claim as a proprietor, people only have to fill out a separate form, and then file their personal taxes alongside this form claiming their proprietorship taxes. One benefit that people can have if they claim that they are a proprietor, is that they get an additional forty-five days to file, because Canada revenue agency believes that the additional paperwork that a proprietor has to do to claim, should grant them an extension on their taxes. Therefore most Canadians have until April 30 to file their personal taxes, but proprietors have until June 15.
There is many expenses that people can start claiming on their taxes if they are the proprietor. Business portions of any traveling that they have done, rent from their home office, mileage and meals and entertainment. People need to ensure that they are keeping extremely good track of everything including receipts, and a mileage log. The mileage log needs to be tracked very specifically in order to be accepted by Canada revenue agency. They need to ensure that they have the purpose of travel documented, and it cannot include commuting to and from work, and it must be a business-related trip. They have to detail where they are driving from, and where their final destination is as well as the date of the trip, and the entire number of kilometers travelled. Edmonton bookkeeping says that there are many smartphone apps that people can utilize in order to make this easier, but they can even use a logbook, or even a notebook to keep track of this, but it is very important that they do.
People are also able to claim a variety of personal expenses for the proprietorship. For example, if they do have a home office, they can claim home-office expenses including portions of utility bills, cell phone, Internet, condo fees, property tax, and even portions of their rent or mortgage.